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As the coronavirus pandemic continues to spread, it is clearly having a negative impact on the U.S. economy and will likely lead to a contraction with higher unemployment rates and bankruptcies. Consumer-facing sectors, such as lodging, travel, restaurants, and entertainment will be hit harder than others. But depending on how fast the virus spreads and the responses by governments, the economic impacts could very well be much wider. For example, in Italy, which saw its infection rate soar sooner than the United States, the government has ordered all commercial retail stores, with the exception of grocery stores, pharmacies, and banks, to shut down.
Even without such draconian measures in the United States, many consumer-facing businesses will lose sales, leading to reduced spending and layoffs. But it’s quite likely that the contraction will spread beyond consumer-facing activities, because consumers and businesses are likely to hunker down and spend and invest less for fear, not just going out in public, but of an impending recession.
In the face of this looming economic reality, several nations have put in place economic stimulus packages. The South Korean National Assembly approved a fiscal stimulus worth $10 billion, while Australia unveiled a $17.6 billion (USD) package. (The U.S. equivalent to match these as a share of GDP would be between $149 billion and $192 billion.) While both nations should be praised for prompt action, it is unlikely that either amount will be sufficient.
The Shape of What’s Needed
In the United States, the immediate focus of any stimulus measure should be to assist those who are hardest hit, first and foremost ensuring they have adequate unemployment insurance (UI). The Canadian government, for example, announced it is waiving the one-week waiting period to collect UI. Congress should implement a similar measure but go further. The average rate of wage replacement for UI payments in the United States is just 38 percent. Congress should mandate that anyone earning less than $1,500 per week ($75,000 annually) should receive at least 75 percent of their weekly earnings in weekly UI benefits, with the additional funds paid by the federal government’s extra appropriations. It should also explore temporarily extending UI coverage to gig economy workers. In addition, we need more generous Small Business Administration loans to small companies affected by the virus—and, of course, spending to support the medical response to the pandemic. The Federal Reserve should also expeditiously cut interest rates and take other monetary policy measures. In addition, the federal government should be preparing to possibly provide loans to companies that are “too critical to fail” should they face bankruptcy.
Fiscal stimulus should also be on the table. However, one of the challenges with a stimulus this time compared to the during the Great Recession of 2009 is that even if the federal government mails consumers checks, or cuts their payroll taxes, they are not likely to spend the money on the most hard-hit sectors, such as restaurants, travel services, and lodging. And even if consumers spend money rather than saving it, it’s not as if laid-off restaurant workers will easily move to other sectors where consumer spending boosts output. But given the fact that the overall contractionary impact is likely to extend beyond these directly affected sectors, there is still a reason for Congress to pass a fiscal stimulus package in addition to unemployment insurance expansion.
Another limitation with a stimulus package focused on boosting consumption is that it can simply move people’s purchases forward in time, leading to a slump later. In contrast, efforts focused on spurring investment stimulate the economy while also leading to long-term growth and innovation. As such, any stimulus package should include measures to spur technology deployment that would not just boost the economy, but also, in some cases, help society become more resilient so that we are better able to cope with future pandemics, which are all but inevitable.
Broadband represents one of the most important tools we have to maintain healthy economic activity while practicing good health practices of social distancing. Rapidly deploying broadband to areas without it will play a role in enabling telemedicine, telework and distance learning, helping to give communities tools to blunt the impact of isolating to stop the spread of the virus. The FCC has coordinated with virtually all leading broadband providers to ensure broadband is widely available during the next two months. Under the “Keep Americans Connected Pledge,” providers have agreed to not terminate service if consumers are experiencing hardship due to the pandemic, waive any late fees during this time, and make WiFi networks more openly available.” Some companies have acted on their own, others in response to the FCC call. For example, Comcast is increasing access speeds on its Internet Essentials package and giving it to new low-income customers at no cost for 60 days, AT&T is removing usage caps that can lead to overage charges, Charter is offering free broadband for 60 days for families with students, and Verizon is waiving late fees and committing not to terminate service if households are not able to pay. These are commendable first steps, but government needs to follow suit.
An obvious opportunity with longer-term benefits is to provide funding to spur rural broadband infrastructure. For years, policy circles have been debating the details of how to do it. At a high level, there is general agreement that a one-time, large-scale injection of capital expenditures for rural broadband infrastructure is the way to go. Funds should be allocated through a technology-neutral reverse auction with a focus on unserved areas, (not underserved) and be focused on reasonable speeds. (It is both unnecessary and expensive to require that every home be served by superfast broadband.) There are always up-front judgement calls on what level of funding is necessary to achieve what type of broadband performance in a given area, but we can rely on the auction mechanism to quickly make the difficult decisions of exactly what type technology or performance quality makes the most sense for a given geography. To ensure that the money is spent mostly on areas that are truly unserved, incumbent companies should be able to challenge companies' bids if their proposed coverage areas include more than a de minimis expansion of areas that are already served. This will help avoid wasteful overbuilding in areas that already have broadband.
Congress should also eliminate existing red tape around high-cost eligible telecommunications carrier (ETC) restrictions to encourage many more and larger companies to bid. To expedite this program, Congress should rely on the FCC, which has experience allocating funds for broadband in high-cost areas. With sufficient resources, Congress could aim to open an auction within 30 days of legislation being passed, with auction bids due 30 days after that.
Broadband and Computer Adoption
More broadly, an immediate focus should be on tools to expand access to low-cost connectivity and devices, and telemedicine tools. Here, the FCC can rely on existing tools to expand access. It appears likely the coronavirus will force school closures for some time. As FCC Commissioner Jessica Rosenworcel has highlighted, not all students will be able to turn to e-learning alternatives through broadband connections at home. The E-Rate program managed by USAC is designed to support deployment to anchor institutions, like schools and libraries. Thanks to various reforms over the years, the program has been a success in connecting most all the schools and libraries in the nation.
Yet the program restricts what types of telecommunications services are eligible for support—generally focusing on wired connections to buildings and WiFi equipment. These restrictions could be adjusted to allow funding for mobile hotspots for students to work away from campus. The FCC ran a pilot program experimenting with such an expansion, that most agree functioned well, but the legal authority is somewhat questionable. The FCC could move forward with targeted support for hotspots for students and provide the connectivity for them through the E-Rate program at least on a temporary basis, given the severity of the issue.
Expansion of the E-Rate program could help provide connectivity to the communities surrounding schools and libraries beyond mobile hotspots. Some have called for the E-Rate program to be extended to support access to the homes of nearby students, which could potentially be done through low-cost access technologies, such as TV whitespaces particularly for areas without existing broadband. This funding could be begin quickly through a waiver that could be evaluated as the situation develops.
As FCC Commissioner Geoffrey Starks has pointed out, many Lifeline beneficiaries qualify for the program through participation in SNAP, which recently saw its work requirements tightened. A contraction in employment could reduce participation in SNAP and in turn Lifeline, limiting the ability of these programs to help correct the downturn. Congress or the FCC should broaden participation criteria.
Congress should provide stimulus funds to expand the Lifeline program, which subsidizes connectivity for eligible low-income Americans. Congress should modernize this program, which has legal constraints designed for the old days when consumers had a single phone operator to choose from. Ideally the program would be a flexible voucher given directly to end-users to spend on two communications services or devices of their choosing. Currently, a qualifying household is eligible for only one service. But most families, especially those who hope to have systems to let kids do homework at home, need both a mobile and fixed broadband connection.
Moreover, if more families had computers and broadband at home, it would be easier to move to remote schooling and work. As such, Congress should appropriate stimulus funding to USAC to spend on deeply discounted laptops for schools to provide to students eligible for school lunch programs (elementary-age students might be provided with tablets instead of laptops).
Distance Learning and Telework
It is also time to create a free, high-quality platform for educational content, which members of the community can contribute to, plus consolidate all the educational materials already created by federal government agencies but spread across dozens of websites). Congress should also provide a grant for an organization to develop an online data-science boot camp, with materials appropriate for K-12 students.
It is clear that teleworking will be critical to any response. Not all jobs are suitable for telework, but many are. To make teleworking more affordable, Congress should repeal the Trump tariffs on computer imports. For example, under the tariffs there is a 25 percent rate applied to flat panel displays and 7.5 percent tariffs on computer monitors and keyboards.
Telemedicine is an obvious tool to combat the epidemic. President Trump already announced that Medicare would expand the use of telemedicine in outbreak areas. But Congress should take an easy and immediate step to by passing legislation to allow cross-border telemedicine services, in particular by adopting a standard definition for telehealth and establishing a single, national license for telehealth providers. Currently, these are limited by out-of-date rules from state medical boards that won’t allow providers with licenses in one state to assist patients in another state.
One key area Congress should focus on is boosting local, state, and federal information technology systems, particularly to better enable the delivery of government services remotely and to facilitate telework for government workers. Too many government agencies are using systems that are old, not citizen-friendly, and expensive to maintain. Agencies don’t upgrade systems the way many companies do, because they lack the capital budgets to do so.
To address this this, any stimulus package should allocate at least $10 billion to the General Services Administration for the Technology Modernization Fund (TMF). The TMF has an established process for reviewing proposals to modernize federal IT systems. GSA should provide $3 billion to upgrade federal agencies’ IT systems and split the other $7 billion evenly between state and local governments. The TMF typically requires agencies to pay back funds over a five-year period based on savings incurred from the upgrade. For state and local governments, the TMF could waive the payback conditions but require all spending to be focused on making it easier for citizens to interact online with government.
State governments should be allowed to submit proposals in rounds, with the first round of funding going to states that commit to the highest rate of matching funds. For example, if 14 states agree to spend 75 cents of their own budgets for every 25 cents in federal aid, and all other states are below this level, these states would be awarded funds in the first round. If funding is still available after the first round, then subsequent rounds of bidding would occur. Cities and counties would follow the same process, but with priority given for lower-income cities and counties. Governments would also be able to use this support not only for internal operational improvements, but to make investments in new areas like smart cities.
Congress should also allocate at least $1 billion for states to make improvements in election technology. These funds should be made available as grants to all states that agree to adopt universal no-excuse absentee voting—i.e., where voters can opt to vote by mail without needing to provide any reason. Allowing vote-by-mail or other forms of remote voting will facilitate participation in elections even in cases of pandemics or other emergencies. States should be free to use these funds to modernize any of their election technologies, including to improve security, as long as they are offering universal no-excuse absentee voting.
Cities can use technologies like data analytics and the Internet of Things to better manage public services and become “smart cities,” thereby improving their resilience in times of crisis, whether it be an epidemic, terrorism, or natural disaster. Congress should also allocate $2 billion for smart city funding. When the U.S. Department of Transportation held a smart city challenge in 2016, it had almost 80 cities compete for a $40 million grant. In the process, many cities developed detailed plans for how they would invest additional funding to become smart cities. Congress should authorize this new round of funding to make resources available on a competitive basis for up to 10 large cities, 20 medium-sized cities, and 30 small cities to receive grants to invest in smart city infrastructure, ideally digital infrastructure that would boosts resiliency. The U.S. Department of Transportation could build off of its prior smart city challenge to quickly conduct and complete its review of this competitive process.
The coronavirus has shown how important widespread and advanced information and communications technologies are to society. But with serious lags and gaps, America is not prepared for national crises like the one that is now unfolding. Congress can change this now and for the future with the right action.